Russia: Taxes and Costs

Country Rating  »

Home ›  Europe ›  Russia ›  Taxes and Costs

High, flat taxes for non-residents

Rental Income Tax: High

Non-residents’ rental income is taxed at a flat rate of 30%, which is generally withheld at source.

No deductions or allowances are available for non residents. Spouses are taxed separately.

Land Tax

Land tax is a municipal tax levied on the land value and the applicable rate varies depending on the use of the land. At the federal level, the maximum rate for agricultural land and land used for housing is 0.3% and 1.5% for other types of land. At the municipal level, the applicable rates are set by the relevant municipality where the land is located.

Corporate Route

The rental income of landlords operating through a Russian subsidiary or a branch of a foreign legal entity is considered as a PE (permanent establishment) and is subject to a general 24% profits tax. As of 01 January 2005, the federal portion is 6.5% and the regional portion is 17.5%. The regional states may decrease the tax rate by 4 percentage points, or at least 13.5%. Therefore the effective corporate tax rate can be between 20% and 24%. The tax is calculated on gross revenues, less almost all economically justified business related expenses.

Interest on debt taken out to finance investments in immovable property is profits tax deductible. The interest rate should not deviate from interest on comparable loans by more than 20%. If there are no comparable loans issued, interest can be deducted at a rate of up to 15% on loans taken out in foreign currency, or the Bank of Russia refinancing rate multiplied by 1.1 for ruble loans.

Property Tax

The property tax rate is set at the municipal level and should not exceed 2.2%. The tax base of property tax is the net book value cost of the property.

Value Added Tax (VAT): High

Leasing land as well as property is subject to 18% VAT.

Withholding Tax: High

The rental income of foreign legal entities without a permanent establishment in Russia is subject to withholding income tax levied on gross rentals at 20%.

Capital Gains Tax: Zero (3 YRS +)

Capital gains earned by nonresidents for selling Russian property within three years of acquisition are taxed at a flat rate of 30%. For Russian property held for more than three years, the entire capital gain is tax-exempt.

When calculating for the tax base, actual expenses incurred may be deducted such as the acquisition cost and other related expenses.

Corporate Route

Gains from sale of real property are included in ordinary business profits and taxed at varying rates, from 20% to 24%. Taxable profits from sale of property by Russian companies and branches of foreign entities in Russia are calculated as gross sales proceeds less the net tax book value of the property.

Gross capital gains earned by foreign companies without a permanent establishment in Russia are withheld at a tax rate of 20%.

Russia - more data and information

• Guide to buying houses and registering property sales in Russia

Your Comments

Post a comment